Discrimination

The Supreme Court held that the taxation laws also must pass the test of reasonableness under Article 14 of the Constitution. While considering the provisions of Entertainment Tax Act by the Government of Andhra Pradesh, providing different rates thereof for Telugu films and Hindi films, was held to be violative of Article 14 of the Constitution inasmuch as the tax on Telugu films was much less than the Hindi films. Such a measure, according to the Apex Court, was unreasonable.

M/s Aashirvad Films vs. Union of India & Others (2007) 30 PHT 125 (SC).

Entries in Schedule

1. Ginger paste etc.

The Kerala High Court held that Ginger paste, Garlic paste and Tamarind paste were covered by sub-entry 18 of entry 120 of Third Schedule appended to the Kerala VAT Act and therefore liable to be taxed @ 4%.

It also held that the mixture of cereals in raw form, roasted or powdered would continue to be covered by entry 86 of the Third Schedule and therefore liable to be taxed @ 4%.

Applying the principle of ejusdem generics, it was held that the banana powder would be covered by sub-entry 25(i) of entry 84 in the Third Schedule of the Kerala VAT Act and therefore liable to 4% VAT.

M/s Manjilas Rice Mill vs. State of Kerala (2007) 15 KTR 297 (Ker)

2. Manufacture

The Kerala High Court held that the roasting of coconut and then converting into paste amounted to manufacture liable to be taxed at 12.5% under the Kerala VAT Act.

M/s Manjilas Rice Mill vs. State of Kerala (2007) 15 KTR 297 (Ker)

3. Maize

The Himachal Pradesh High Court held that maize was a coarse grain falling under Item No. 13 of Schedule B of the Himachal Pradesh VAT Act and therefore exempt from tax.

M/s Das Enterprises vs. State of Himachal Pradesh.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10 Part 8, Page 860.

Exemption

1. The Supreme Court disapproved the judgment of the Rajasthan High Court and held that the job work performed by an industrial unit enjoying exemption cannot consider the receipt from job work as its own production for the purpose of grant of eligibility certificate.

Commercial Tax Officer, Jodhpur vs. M/s Vishnu Materials & Others (2007) 50 S.T.A. – 10.

2. Reversing the judgment of the Andhra Pradesh High Court, the Supreme Court held that before the claim of exemption made by the assessee was decided, the criterias thereof as enumerated in provision concerned have to be fulfilled. For that purpose, the revenue can require the assessee to produce the evidence in support of the claim.

M/s Shakthi Seeds Pvt. Ltd. vs. Deputy Commissioner (CT) & Another (2007) 30 PHT 121 (SC).

Forfeiture

The Karnataka High Court, while interpreting the word ‘collected’ in section 37(I) of the Karnataka Sales Tax Act, 1957, held that considering the spirit of the provision and the setting thereof, it would mean ‘collected and kept as his’. Therefore, if the dealer after collecting the amount by way of tax, had kept it in the suspense account pending the final decision about the liability and repayable thereafter, would not be available for forfeiture under the said Act.

M/s Hindustan Photo Film Manufacturing Co. Ltd. vs. State of Karnataka.

Source : Sales Tax Matters, 1st August 2007, Vol. 10 Part 8, Page 865.

Interest on refund

The Supreme Court held that when the Government changed the stage for levying tax from last purchase point to first point of sale, the claim of the buyer from a registered dealer on payment of tax for refund along with the interest was justifiable.

Commissioner of Sales Tax, Orissa & Others vs. M/s Crown Re-Roller (P) Ltd & Others (2007) 15 KTR 335 (SC).

Interest

The Haryana Tax Tribunal confirmed the charging of interest on the amount found due when the assessee, under the bona fide belief that the exemption applied for would be granted, had not collected the tax. The Tribunal in that connection held that the assessee cannot derive any benefit from the situation created by himself and the liability of paying the interest accrued automatically.

M/s Om Spinning & Weaving Mills, Karnal vs. State of Haryana (2007) 30 PHT 137 (HTT).

Inter-State sale

The Supreme Court reiterated the well laid down principle that for deciding the nature of the transaction as inter-State, it was sufficient that the movement of goods was occasioned by the sale or as an incident thereto. In other words, there should be inseparable connection between the transaction of sale and the movement of goods. The Supreme Court in that connection observed that it was not necessary that the contract of sale should expressly provide for the movement. It would be sufficient if hypothetically it can be inferred or implied about the movement.

State of Orissa vs. M/s K. B. Saha & Sons Industries Pvt. Ltd.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10, Part 8, Page 804.

Packing material

The Punjab & Haryana High Court held that where the sugar was sold duly packed in the bags, it was up to the department to prove that there was an implied sale of bags before levying tax.

M/s Mahesh Traders, Firozpur Cantt. vs. State of Punjab.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10 Part 8, Page 837.

Precedent

The Andhra Pradesh High Court held that the latest judgment of the Supreme Court was applicable and not an order of reference to a larger bench by another division bench.

M/s Johnson Lifts Ltd. (Now Johnson Lifts Pvt. Ltd.) vs. Deputy Commissioner (CT) Hyderabad. Source : Sales Tax Matters, 1 August, 2007, Vol. 10 Part 8, Page 864.

Reconstruction of records

The Punjab & Haryana High Court observed that when the appeal papers were lost in the office of the Tribunal, the assessee should furnish the copies thereof from his records, so as to enable the Tribunal to decide the appeal on merit.

M/s Gee Kay Textiles Ltd vs. State of Haryana.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10 Part 8, Page 824.

Recovery

The Kerala High Court, after considering the judgments on the topic including that of the Apex Court, held that the purpose of RDB Act enacted by the Parliament was for speedy recovery of the amount, but it did not create any statutory charge for the banks or financial institutions. The Hon’ble High Court also observed that there was no conflict between Kerala General Sales Tax Act and the RDB Act in the matter of recovery of dues by banks and financial institutions. In view of that position, the court held that the recovery provisions under the Sales Tax law and the RDB Act stood on the same footing.

State Bank of Travancore vs. Recovery Officer, Employees State Insurance Corpn.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10 Part 8, Page 870.

Refund

The Jharkhand High Court held that the amount paid as on account payment of 20% of the tax assessed, for hearing the appeal on merit, was not in fact the actual dues of sales tax, but was a deposit of appeal fees under section 45(3) of the Bihar Finance Act, 1981 as applicable to the State of Jharkhand. Therefore, when the appeal in question was allowed by the appellate authority, no application for refund of such deposit was essential and the department was duty bound to refund the amount along with the interest due thereon under section 42 of the said Act.

M/s Hindustan Engineering Products Co. vs. State of Jharkhand & Others. (2007) 30 PHT 193 (Jharkhand).

Reassessment

The VAT Tribunal, Punjab, held that

the original assessment which became final cannot be reopened only on the basis of audit objection.

M/s Tata Iron & Steel Co., Jalandhar vs. State of Punjab (2007) 30 PHT 211

Sale in the course of import

The West Bengal Taxation Tribunal, on interpretation of section 5(2) of the CST Act, held that the concept of ‘custom frontier’ was irrelevant while considering the situs of sale under section 4 of the CST Act. In that regard, it also held that the custom area within the barrier was also part of the State concerned. In view of that position, the Taxation Tribunal held that the sale from custom bonded warehouse to foreign vessel was within the custom frontier, but cannot be considered as sale in course of import or export.

M/s Nirmal Kumar Parsan vs. C.C.T. West Bengal & Others (2007) 50 S.T.A. - 18.

Sale or transfer

The Haryana Tax Tribunal held that the transaction between one unit or branch of an assessee and another branch or unit of the same assessee cannot result in a transaction of sale, but were just stock transfers as the transfer of property in goods cannot take place from the same individual to its own self.

M/s Jay Bharat Maruti Ltd., Gurgaon vs. State of Haryana (2007) 30 PHT 229 (HTT).

Works Contract – Deduction

The Supreme Court held that the tax was payable only on the value of the goods deemed to have been sold in the execution of the works contract. Therefore, the deductions which are to be considered were not only labour charges but also other similar charges as enumerated in the case of M/s Gannon Dunkerley & Co. (88 STC 204). In other words, the total contract value of the works contract cannot be taxed.

State of Jharkhand vs. M/s Voltas Ltd.

Source : Sales Tax Matters, 1st August, 2007, Vol. 10 Part 8, Page 819.

News from Uttar Pradesh

The Commissioner of Trade Tax, U. P., by Circular dated 10th August 2007, have informed all concerned that the sale by Special Economic Zone Unit to another person in Domestic Tariff Area would be liable to tax. If such a sale happened to be inter-State, then C.S.T. also was payable.